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Ticket to ride: what will happen to roadside pit stops when cars go electric?

Driveways, not gas stations, are the fueling stations of the future. Energy and infrastructure companies should get ahead of the opportunities in smart charging.
Hauke Engel

Hauke is a partner with the McKinsey Center for Future Mobility, based in our Frankfurt office.

Shivika Sahdev

Serves automotive and aerospace OEMs, suppliers, private-equity investors, and governments on disruptions in mobility and their likely impact—on the ground and in the air

It’s hard to ignore the signs: Electric vehicles (EVs) are revolutionizing the car market. Over the next decade, EVs, which run on rechargeable batteries and use no gas or diesel, could account for a quarter of worldwide car sales—buoyed by the expected launch of more than 350 new EV models by 2025 and by traditional car makers already committed to shifting out of gas and diesel makes altogether.

Government policy has followed suit. Starting this year, car makers in China, already home to 60 EV brands, will have to comply with a mandatory EV credit target. Norway wants all of its new car sales to be EVs by 2025, and by 2040, the UK, France and California—often the harbinger of nationwide change—will no longer sell traditional combustion engine cars. Further momentum driven by statewide incentive policies seems likely.

Will the reign of the 100-year-old internal combustion engine be over just like that? Not quite. Having overcome high cost and short driving ranges (which today often top 200 miles), EVs’ next hurdle for market penetration is the lack of available battery recharging infrastructure. Without quick pit stops to refuel, future motorists will need places to plug in and more time to do it. In exchange for upfront infrastructure investment, widespread electric car use will bring better air quality and zero climate-changing tailpipe emissions.

The vast majority of EV owners in the U.S. will likely charge in their own driveways, safe in the knowledge that their close-to-home car will replenish its battery during those stationary overnight hours. Driveway and garage car charging is cost effective because it uses off-peak residential, as opposed to commercial, electricity prices. This prediction is supported by McKinsey’s own forecast of zip-code-level EV penetration data: suburbs will emerge as hot spots for early EV adopters.

In dense urban areas, where single-family homes are fewer, public charging will be required, spurred by on-street and commercial garage parking demand. China is already planning 4.8 million public charging stations by 2020, an ambitious project that may incentivize other countries to catch up quickly. Retail-driven charging stations may also be part of the future commercial landscape: Several retailers are already giving customers the opportunity to shop while powering up.

How energy companies can steer charging behavior

What will the increased demand on the grid be? The figures are not overwhelming. In Germany, for example, EV growth will most likely increase total energy demand by just 1 percent through 2030 and 4 percent by 2050—increases that won’t require additional supply. However, residential hot spots and other concentration points of EV charging, such as public EV-fast-charging stations and commercial-vehicle depots, will see significant increases in local peak loads. To forecast changes in the load curve in residential areas, the McKinsey Center for Future Mobility conducted an analysis of a typical residential feeder circuit of 150 homes at 25 percent local EV penetration. The analysis indicated that the local peak load would increase by approximately 30 percent. These concentrated charging ‘hot-spots’ change the electricity load curve and create challenges for energy distributors.

Energy producers and distributors need to start thinking about how to reshape the electricity load curve to avoid pushing local transformers beyond their capacity. What are their options? One option is time-of-use (TOU) electricity tariffs to incentivize charging after midnight. Analysis shows this could halve the increase in peak load (see exhibit). Alternatively, energy players can install an energy storage unit with transformers that charges the unit during times of low demand and discharges at time of peak demand. The business case for energy storage is compelling: Shaving peak loads reduces extra fees while also avoiding grid upgrades.

Time-of-use rates could halve peak loads.
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Early insights into the charging behavior of EV owners suggest that a significant share of EVs remain plugged in long after they’ve stopped actively charging. This creates the potential to shift the charging load and thereby optimize charging times and speeds from a systems perspective, thus making charging smart. Smart charging, which allows even more effective peak shaving, can lead to reduced investment levels in the grid and allow an integration of a larger share of renewables.

Pilot studies have shown that EV owners are keen on coordinated smart charging. To realize these benefits, energy players must take advantage of their newfound role in 21st century transport. This will require making upfront investments in smart-charging infrastructure to ensure the electric car market is revved up and ready to roll.

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